50/50 JV - Monthly reporting (within the venturer)

Should it be reported in the monthly MA packs

Didn't find your answer?

Hi

We are currently involved in a JV and we reported our share of the profits in our statutory financial statements. This was done done via equity method and a topside entry JE to account for the Investment in the JV. 

This was done as a topside adjustment so the profit isn't showing in the company management accounts.  We will post this JE into our system to record it on the B/S and I/S for last years profits. All good so far.

My question is, would you nornmally expect to see the JV profits going through the monthly management accounts each month? One of our department managers wants to see this going through their results as revenue each month - from an internal reporting perspective, is this something you would normally see? If we did do this and did a JE each month to reocrd JV profit as revenue to pull through our MA packs each month, i would need to remove that revenue at YE when reporting the JV profits via equity method. 

In my eyes, the JV is a separte entity and as we are equity method you wouldn't see any "revenue" consolidated. Or does it not matter if only internal anyway and means just another job to remove these JE's at YE? 

This is our first JV so hopefully not a dumb question. In short, would you expect to see this going monthly in the management accounts 

Thanks 

Replies (4)

Please login or register to join the discussion.

John Toon
By John Toon
28th Mar 2024 09:55

Unfortunately the answer to this question is - it depends! What do management want to see? I think most JV's would be reported on separately but no reason why it couldn't be consolidated up into overall management reports.

Thanks (1)
Replying to johnt27:
avatar
By DaveLu
28th Mar 2024 10:44

Thanks for reply. Apologies for further question. If we did do this monthly e.g. simply Dr Investment, Cr Revenue. I guess it will then need to be reverse out/adjusted back out at YE prior to any tax computation as we don't want to report this as revenue. Would it be as per the (50% of) recorded monthly figure in the JV before tax? We would normally record our share after been audited and all tax work completed so we know the figure to plug in at YE. Would it be reported pre tax internally or do you estimate the tax? Seems strange to me to do it this way and complicate our own TB. Maybe the answer is the same and if depends if you want to. Keen to know how others would do this

Thanks (0)
avatar
By paul.benny
28th Mar 2024 10:41

I think the key is hidden in your question. "one of your department managers wants to see..." - presumably because this flatters their department's numbers. My guess is that a lot of their cost is recharged to the JV.

How you report in your monthly results is a question for the finance director/head of finance (you?) to agree with the MD/CEO and you should be taking the lead in recommending what makes most sense.

What makes most sense depends a lot on the nature of the JV - operationally speaking, what are you bringing to the JV compared with your partner. For example you might be doing all the work while partner brings know-how, customer relationships, etc.

Thanks (0)
Replying to paul.benny:
avatar
By DaveLu
28th Mar 2024 10:48

Effectively yes. they want to see this reported in their numbers but from board level just a report on how the JV is doing has been enough so far.

Both JV partners recharge for their respective costs each month, so staff costs/IT and finance and HR so this will already be recorded in our accounts each month.

Thanks, appreciated

Thanks (0)